Now more than ever, custom manufacturers are looking to improve operational efficiency and reduce costs, while continuing to meet their customers’ needs and achieve their business goals. An ERP (Enterprise Resource Planning) system is an essential tool for custom manufacturers: not only does it allow them to streamline their operations, but it also greatly reduces their costs.
Custom manufacturing is a complex process that involves a long series of operations, from production planning to shipping, sourcing and inventory management. If an ERP is so essential, it is because it centralizes all the processes, activities and data of a company in a single platform, thus offering a unified view of all operations: production planning, inventory management, customer relations, financial management, and so on.
This extensive supervision allows you not only to streamline your production processes, but also to significantly reduce your costs. Manufacturers using an ERP system get real-time, accurate information about their day-to-day operations, reducing operating costs by 23% and administrative costs by 22%.
Six ways to reduce your operating costs with an ERP
1, Streamlined production planning
An ERP system provides manufacturers of custom products with a centralized platform to plan and manage their production processes. Thanks to this tool, they optimize their production schedules, allocate their resources more efficiently and reduce their production times. And that’s not all: a better understanding of production processes helps to identify opportunities to lower costs ‒ by reducing material waste or improving quality control, for example.
By providing real-time data on things like machine performance, inventory levels, and production schedules, ERP software can help your production manager make more informed choices that are better aligned with targets and your business goals, increasing efficiency and reducing costs.
2, Improved inventory management
ERP systems track stock levels in real time, helping you recognize out-of-stocks and reducing the risk of overstocking, resulting in less wastage and lower storage costs.
With real-time information provided by your ERP, you can reduce your inventory levels, free up capital, and reduce the risk of items or components being damaged (by dragging around the factory or workshop, for example) or some of them become obsolete or remain unused on a tablet. Modern ERPs specifically designed for custom manufacturing also make it possible to accurately forecast inventory needs, right from the estimate stage. Accurate forecasts let you know what items, components and raw materials you will need, giving you time to purchase the inventory needed to keep your plant or workshop running smoothly. So you buy and store only what you need.
ERPs also help automate many tedious inventory-related processes, such as managing physical inventories. Without a real-time inventory system, you sometimes have to shut down your operations to manually take inventory of your inventory.
RELATED ARTICLE: Learn how Genius ERP customer Motrec reduced over $400,000 in inventory costs alone after implementing Genius ERP’s real-time inventory management feature.
3, Tightening of financial management
ERP systems provide bespoke manufacturers with real-time financial data, including cash flow, revenue, and expenses. This allows you to recognize areas of overspending and make informed decisions with the goal of reducing costs. Making the right decision at the right time, based on accurate data, helps steer your business in the right direction by allowing you to focus on profitable manufacturing operations. Result ? You will give up financially unjustified projects.
Accurate financial data also improves budgeting and forecasting processes, reduces the risk of errors and optimizes cash flow management.
By using an ERP platform to automate financial operations, your accounting department will also realize savings. By integrating into a single platform a ifying the various systems and applications used by your finance department, an ERP reduces the need for manual data entry and the burden of other time-consuming tasks, saving time and reducing costs.
4, Simplification of supply and purchases
With accurate, real-time data, bespoke manufacturers can optimize their sourcing processes, reduce lead times, and get better deals from their suppliers.
ERP software automates and streamlines your purchasing processes. Here’s why: Because ERP always manages your inventory levels in the background of everything you do, you know what inputs you have on hand and what needs to be ordered to complete a manufacturing order. With an ERP, you can also create a voucher with a single click ‒ instead of doing it manually ‒, which translates into significant time savings and significant savings in money.
ERPs allow custom manufacturers to create and track purchase orders electronically, reducing the risk of errors and delays, in addition to generating significant cost savings. In addition, you can use real-time data on demand, inventory levels, and all purchase orders (aggregation) to negotiate better prices with your suppliers.
5, Reduced engineering time
Wasted engineering time is a major issue for custom fabricators. Manually transferring BOM from a computer-aided design (CAD) system to an ERP can consume up to 20% of engineering time ‒ time that could be spent on other more critical and profitable tasks
The good news ? An ERP system equipped with CAD2BOM (Computer-Aided Design to Bill of Materials) automatically converts 3D CAD models into BOMs, providing an accurate list of all components needed for manufacturing. This not only saves engineering time, but also improves accuracy and efficiency by accelerating production order execution and reducing error rates. Given the labor costs of your engineering department, any measure that allows your engineers to focus on the most specialized tasks ‒ such as the design itself ‒ generates substantial savings.
6, Better managed customer relationship
ERP systems provide custom manufacturers with a unified platform to manage customer interaction, from order processing and shipping to after-sales service.
This can help you improve customer satisfaction, reduce the risk of order errors, and increase your pool of repeat customers. With a better understanding of your customers’ needs, you recognize upsell and cross-sell opportunities, increasing your revenue and profitability.
Investing in an ERP: a profitable choice
ERPs reduce operating costs by significantly contributing to streamlining processes, improving production planning, optimizing financial management and increasing customer satisfaction. As improving operational efficiency and reducing costs become more pressing for custom manufacturers, investing in an ERP system can provide them with a fundamental competitive advantage.
Of course, investing in an ERP is expensive. ERPs require significant outlays, it’s true, but the return on investment is well worth the cost. Although the cost of deploying an ERP can be high, this solution improves operational efficiency, strengthens decision-making, reduces error rates and lowers costs. An ERP also allows you to increase your turnover and your sales, whether through the precise establishment of manufacturing costs or the possibility of better meeting customer expectations.
A study by Panorama Consulting Solutions found that, on average, the ROI of deploying an ERP was 168% over approximately 3.7 years. If you implement such a system, you will have more than doubled your initial investment in a very short time. This is why adopting an ERP is a wise “investment” that will improve the management and performance of your business on several levels.